What Happens If You Can't Pay Your Credit Card Bills?
With credit cards accounting for such a large portion of the UK's unsecured debt, it's little wonder that many thousands of people are starting to struggle to make their repayments. Not only has the recession reduced incomes or caused job losses, credit card APRs have remained obstinately high, even in some cases increasing, no matter what the Bank of England does with the base rate.
If you find yourself unable to meet your monthly repayment, and go into arrears, what exactly can happen?
Stay Calm
First of all, DON'T PANIC, to use a well worn phrase. Credit card debts can't lose you your home (at least not directly), you can't be arrested and thrown into a debtors' prison, and you won't be getting a visit from large gentlemen demanding instant repayment.
The Worst That Can Happen
>What CAN happen is that you could be taken to court and have a CCJ granted against you for non-payment. After this, it's possible that further court action could be taken resulting in an attachment of earnings order, a charging order, or bailiff action. In reality, things don't get to these stages as often as you might think.
Court action is costly for the card issuers, and is also bad for their public image - not that the banking industry is held in great esteem these days in any case, but issuers will prefer to avoid bad publicity whenever possible.
Negotiate A Repayment Schedule
In most cases, credit card companies will be willing to come to some sort of repayment arrangement. Write to them explaining the circumstances which make it impossible for you to honour the credit agreement, and make an offer to repay a monthly amount that you can afford. Even if this amount is tiny, it at least shows that you are trying to do something about the situation rather than just ignoring the problem.
Also ask that interest and penalty charges be frozen, so that the balance doesn't spiral out of control while you're making the reduced payments. An organisation such as Citizens Advice can be very useful here - their free help can result in a much more affordable resolution than if you did it all yourself.
With luck, your card issuer will agree to your proposal, and so long as you keep to the agreed monthly amount, no further recovery action will be taken, and you can resume your normal repayment levels when your situation improves again.
Credit Rating Damage
Be aware though that even though you've negotiated with your card issuer and everyone is satisfied with the result, you'll still have broken your original credit agreement, and this will usually be reflected on your credit file with a default notice.
Related Articles:
- What Makes a Credit Agreement Illegal?
- Wipe Out Credit Card Debts
- Getting Credit Card Debts Under Control
- The Slowest Way To Pay Down Credit Card Debts
- 4 Ways To Tackle Credit Card Debt
Site is for information only and does not constitute financial advice. E&OE.
